Weekly thought on $AMRN, $CERS, $IBIO, $MTCH

Oop! What we have here is a belated April Fool day.

“Brexit, Naah, UK will stay, look at the polls!”

…intermission…

“Hey, wait a minute, WTF? Did they switch the Remain/Leave label on the TV screen the other way around by mistake?”

By the 70% counted level, the reality of Brexit began to sink in.  No matter how many times I clicked on the browser refresh to get the latest count, the leave camp percentage stayed stuck at the 51.x%.

Did anyone see it coming?

Although I had a tiny voice inside my head whispering that Brexit was happening based on the following innocent clues:

  • an article mentioned that in a TV program in U.K., applaud on the mention of “Leave” was much more enthusiastic and louder than when “Remain” was uttered.
  • read an article about how resentful and upset the town people  were when a group of immigrant was forced onto their town by the E.U. policy.

But the stock market was bouncing nicely from Monday and ended with a pre-celebratory strong close on Thursday expecting the “Remain” to win because the “polls” said so.  So who am I to argue differently?  So my mind was pretty much “relaxed” (or should I say “complacent”) about this whole Brexit nonsense.  It would blow over and the stock markets will continue on its merry way of making new historical high once again.

Boy, were we wrong!

The SP500 was down 25 points when I was leaving my office and down 70 points when I got home.  And when the counted was at 75%, the SP500 was already down 100 points.

“Were you surprised the market reacted the way it did?”

The market was expected to react the way it did on Friday when the “Leave” camp won. The surprise was not on the reaction but on the vote itself. We are now witnessing a “messy” divorce in the E.U.  My 2 cents is that this divorce is no difference than a divorce of a couple who split ’cause one party is just completely fed-up with being ordered to follow specific instruction or else.  How do you think this drama is going to play out?

Not good.

Words will be exchanged and emotions are going to rise. Meanwhile the fear of a messy divorce is tempting the bear to come out of its hibernation to wreak havoc among the innocent. And this was going thru my mind on Friday late afternoon when price began to roll back all the morning bounce.  With the bounce disappearing, a feeling of foreboding came over me and I knew I had to do something quick. Due to my outsized positions, I’ve no choice but to exercise safety protocol in the face of a surprised economic bomb like the Brexit.   I began to sell down three of my positions- $AMRN, $CERS, $MTCH.

I started unloading $MTCH when price break thru the afternoon support around $14.75 (see red box in 5 minutes chart below):

MTCH_5min

Failure to re-bounce from $14.75 support meant sellers were coming back.

Why didn’t you sell when price was above $15 in the morning bounce?

Well, like everyone else, I was trying to give the market a chance to correct the over-reaction and in general “hoping” that this Brexit was going to blow over like yesterday wind. Nevertheless after the bull failed to regain momentum in the late afternoon, I threw in my towel and voted for Zexit.

Because I only have four positions in my port, it was quite easy for me to exit quickly and effectively once the decision was made. I reduced my position size in $MTCH & $CERS significantly and sold my entire position on $AMRN.  The only one I did not touch is $IBIO.

Why not iBio?

As I mentioned before, this is an event play.  I’m waiting for the news update on the fibrosis treatment and Brexit has nothing to do with what iBio is doing.

Hey, neither do AMRN, CERS, and MTCH!

True, but AMRN, CERS, and MTCH are all big boy stocks (small-cap and above) with decent volume so there are enough big traders in the stocks that can be affected by something like Brexit. Meanwhile iBio is a microcap stock with low volume that the big traders would not even bother to ask for a phone number if you catch my drift.

However, this little baby, iBio, will, IMHO, eventually becomes a Wall Street darling that all big traders will have its phone number in their VIP list.

Btw, it is by my own evolutionary design that my trading positions shrink to only a handful of positions but with outsized bet.  This design allows quicker in-and-out of position without tripping over too many positions.  Success of this design hinges largely on picking the “right” stocks and the ability to “Get the hell out of Dodge” quickly when the bullets start flying.

Well, the bullets are flying and I have raised cash to 75% level waiting for an opportunity to do some bargain shopping later.

How can you be so sure there is more correction coming?

I don’t but if you look at the weekly SP500 chart below, I could not help but feel that price is going to drop further down like they did back in late August 2015 and January 2016. And since this big drop happened on Friday, the thought of “Black Monday” naturally come thru my mind as well.

SP-500_weekly

Notice that Friday price closed below last year closing price as well as being under the 5, 15, and 79 MA supports.

In a nutshell, I believe U.K. has won the battle but lost the war.  This “exit” could potentially unravel the global financial structure and expose the dark truth that no one wants to see.  There is a reason for the formation of the E.U. and it is my innocent theory that no one single country which do not have the size and population of sitting on a vast land mass (like the U.S., Russia, and China) has the might and power to fend for itself in this new world order.  By forming E.U., E.U. now occupies a vast land mass with a mighty stance and a strong voice.  U.K. is now a lone voice without the backing of the E.U.; thus their ability to be heard in the world order is severely limited.

Due to the strong rallies of $MTCH & $CERS going into Thursday, Friday drop only took back all my week gain plus a little bit more.  Basically, despite a bad Friday drop, my port only gave back 2% compared to the week before.

Oh before I forget, why did you sell all of Amarin?

That because Amarin is in a downtrend while Match Group and Cerus are on an uptrend.

Current positions:

Main port (no margin): IBIO  MTCH  CERS and 75% cash. (up 27% YTD)

Trading port (with margin): IBIO (down 5% on position only. I’m up YTD thanked to ARTH which I no longer own)

My 2 cents

From my camera:

140

 

 



Categories: Daily trading Journal, trading journal

Tags: , , , ,

2 replies

  1. This has nothing to do with the specificly noted tickers. Lets be clear up front; I voted to exit. I too noticed the applause volume at the end of the debates….the writing was on the wall ! I immediately swapped ALL my cash into US$ at $1.48 and sold most anything that had a dot L behind it. But you should realise, this is NOT a divorce yet….its a trial separation and we may yet kiss and make up, so creating a far better partnership.
    I truly believe that the idea of one unelected partner having absolute control over the other, is a recipe for disaster in any marriage (been there, done that twice!). Thats NOT democracy….thats Dictatorship. What has been v interesting is that since the referendum, many influential voices from all across Europe, have been calling for root and branch reform of the EU….in short ripping up the Treaty of Rome that commits to ‘ever closer political union’ that can only end with the United States of Europe. The idea that any central body can act in the best interests of individual countries as diverse as UK and Hungary….or Denmark and Greece, is farcical and bound to fail in revolution. Well the UK is revolting (scuse pun). Ultimate soveregnty MUST reside with the home nation for all but the most federally important matters….to do it any other way is to try and erase the concept of National pride. Thats the cause I voted for…..the rest was just fluff. Should we do away with national teams at the Olympics or the World cup and settle for Individual one-world competitions? Maybe…but It will never happen. Nationalism courses through human blood and it will NEVER vanish.
    Now I have a sneaking feeling that our bottom line exit terms may be achieved by ‘structural revolution’ within the EU, making it unnecessary for us to leave. Remember, the referendum result is only ‘advisory’ and can be reversed if the terms of engagement change…..ask Scotland!
    Meanwhile, all the hoo ha! will mostly be as yesterdays chip paper in a week. Im changing my $ back to £ at ~$1.36 and buying my dot L stocks back at a discount.
    To the tune of:
    ‘Rule Britannia, Britannia waives the rules
    Britons never never never will become the EU’s fools.

    • First, I want to congratulate you on the management of your portfolio based on your conviction which resulted in saving yourself a lot of headache. And thank you for sharing your thought, it is an honor to have a subject of U.K. to provide us an inner perspective.

      At first, I thought about the possibility of U.K. Parliament rejecting the “advisory” role of the Brexit vote, but the resignation of PM David Cameron pretty much solidifies the Leaving camp. I’m not sure E.U. can be made to change ’cause of Brexit. Have you heard of the saying that “if you threaten to divorce, you hold the power to balance the dynamic of the relationship; but once you actually file a divorce, you lost the power to make change in the relationship.”

      The structural revolution within the E.U. you mentioned will require all the leaders in the E.U. political system to think like a Buddha. Without going further into a political debate that can go on ’til the cow comes home, I think you know what I mean.

      One thing I like to mention is that any country can still maintain their national pride even when you are a member of a bigger group. Although the United States of America has 52 States, each State has their own “national” pride as well.

      Good luck and congratulation again on your portfolio “exit” before the vote.

      Z

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: